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Labour Market Dynamics and the Business Cycle: Structural Evidence for the United States

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Author Info
Ravn, Morten O.
Simonelli, Saverio

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Abstract

We use a 12-dimensional VAR to examine the dynamic effects on the labour market of four structural technology and policy shocks. For each shock, we examine the dynamic effects on the labour market, the importance of the shock for labour market volatility, and the comovement between labour market variables and other key aggregate variables in response to the shock. We document that labour market indicators display "hump-shaped" responses to the identified shocks. Technology shocks and monetary policy shocks are important for labour market volatility but the ranking of their importance is sensitive to the VAR specification. The conditional correlations at business cycle frequencies are similar in response to the four shocks apart from the correlations between hours worked, labour productivity and real wages. To account for the unconditional correlations between these variables, a mixture of shocks are required.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6409.

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Date of creation: Aug 2007
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Handle: RePEc:cpr:ceprdp:6409

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Keywords: Beveridge curve Dunlop Dunlop-Tarshis observation labour market dynamics neutral and investment specific technology shocks structural VAR

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Annika Alexius & Bertil Holmlund, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," Kiel Working Papers 1329, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  2. Andrew McCallum & Frank Smets, 2007. "Real wages and monetary policy transmission in the euro area," Kiel Working Papers 1360, Kiel Institute for the World Economy. [Downloadable!]
  3. Matthias S. Hertweck, 2006. "Strategic Wage Bargaining, Labor Market Volatility, and Persistence," Economics Working Papers ECO2006/42, European University Institute. [Downloadable!]
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